Follower notices

By Tolley
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The following Personal Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Follower notices
  • Introduction
  • Timeline for issue of a follower notice
  • Interaction with accelerated payment rules
  • Penalties
  • Is the adviser in an impossible situation?

Introduction

From 17 July 2014, HMRC can issue notices requiring taxpayers to amend their Tax Returns where:

  • the Return is subject to an ongoing enquiry or appeal, and
  • there is a final judgment (which includes a decision in the First-tier Tribunal which is not appealed) in a tax case which HMRC is of the opinion applies to the taxpayer's situation

FA 2014, ss 204-205

The penalties for failing to amend the Tax Return following receipt of a notice can be as much as 50% of the tax at stake and will apply in addition to any other penalties due up to a maximum of 200% of the tax (higher maximum percentages apply where an offshore matter is involved). For more on offshore matters, see the Penalties for offshore matters guidance note.

FA 2014, ss 208-212

The taxpayer must decide whether he should:

  • accept the follower notice, amend the Tax Return and pay the tax due (plus interest and penalties), or
  • continue with the enquiry / litigation and appeal the penalty charged by HMRC for failing to take corrective action on receipt of a follower notice

If the taxpayer takes the second option he will have to pay not only the tax but also a penalty of up to 100% of the tax (higher if there is an offshore element involved) if he:

  • loses the litigation on the tax advantage issue, and
  • loses or abandons the litigation on the penalty for failure to take corrective action

If the

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